Why the Orion Health Group Ltd share price jumped 30% in April

E-Health solutions provider Orion Health Group Ltd (ASX: OHE) has been on a tear in the past month, following a number of major contract announcements in quick succession.

On 30 March, Orion announced a contract with a major US health insurer. While financial specifics were not provided, if we use the number of patient records Orion manages as a proxy, then the announcement for 3 million patients represented an increase of around 3% on the company’s previous total of 90 million records.

On 6 April, Orion announced it had won a contract with Metro North, the largest health service in Queensland, to provide its Referrals Management software platform. Metro North serves 900,000 people, and Orion believes the company could be convinced to subscribe to additional services from Orion in the future.

Just this morning, Orion announced yet another deal, this time with health providers in England and Scotland. Orion will provide integrated solutions to two leading hospitals in London, as well as an integrated solution for National Health Service (NHS) centre in Fife, in Scotland. The London hospitals serve over 1 million people, while NHS Fife serves 360,000.

Productivity in health management

The type of software provided by Orion reduces the people-management burden at hospitals and, can be an effective and cheap way to boost productivity while also improving the quality of patient care. The benefits to Orion include regular income through its fee-based subscription model, as well as relative customer stickiness due to the difficulty of selecting an alternative provider.

Another company easing the burden on medical professionals, this time in the field of radiology, is Pro Medicus Limited (ASX: PME), which has also soared in recent weeks thanks to a number of contract wins in the US. While neither company looks particularly cheap on conventional valuation metrics, investors must look beyond price to the potential growth that lies ahead. Orion is still a loss-making business, but it is well diversified and recent contracts give it a good platform from which to bid for more customers.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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